News: 25% of U.S. healthcare spending wasted, JAMA study finds

CDI Strategies - Volume 13, Issue 48

The Journal of the American Medical Association (JAMA) published an analysis stating that roughly 25% of the $3.8 trillion spent annually in the U.S. on healthcare can be characterized as waste.

Researchers from Humana and the University of Pittsburg School of Medicine performed a review of U.S. reports published between January 2012 and May 2019 to analyze the six waste domains previously identified by the Institute of Medicine and Berwick and Hackbarth. These waste domains are:

  • Failure of care delivery: Hospital-acquired conditions and adverse events, clinician-related inefficiency, and lack of adoption of preventative care services
  • Failure of care coordination: Unnecessary admissions and avoidable complications as well as readmissions
  • Overtreatment of low-value care: Low-value medication use, low-value screening, testing, or procedures, and overuse of end-of-life care
  • Pricing failure: Medication pricing failure, payer-based health services pricing failure, and laboratory and ambulatory pricing
  • Fraud and abuse: Fraud and abuse in Medicare
  • Administrative complexity: Billing and coding waste, and physician time spent reporting on quality measures

The review found the following results for the estimated annual cost of waste in each domain, as well as the estimated annual savings from interventions to reduce waste.

Waste domain

Estimated annual waste

Estimated annual savings from interventions

Failure of care of delivery

$102.4 billion - $165.7 billion

$44.4 billion-$93.3 billion

Failure of care coordination

$27.2 billion - $78.2 billion

$29.6 billion-$38.2 billion

Overtreatment of low-value care

$75.5 billion - $101.2 billion

$12.8 billion-$28.6 billion

Pricing failure

$230.7 billion - $240.5 billion

$81.4 billion-$91.2 billion

Fraud and abuse

$58.5 billion - $83.9 billion

$22.8 billion-$30.8 billion

Administrative complexity

$265.6 billion



Administrative complexity was associated with the greatest portion of waste, however, researchers were unable to find any generalized studies that had targeted administrative complexity as a source for waste reductions. The researchers suggest that enhanced collaboration between payers and clinicians around value-based payment may be one of the largest opportunities to reduce waste in this category.

While the 25% waste (a whopping $760 billion-$935 billion) might seem like a huge portion of the overall spending cost, it is down from the estimated 30% in 2011. Still, the average inpatient stay costs $22,000, according to a study from the Institute for Health Metrics and Evaluation at the University of Washington, putting the U.S. far above other nations.

Editor’s note: To read the full study from JAMA, click here. To read about the previous study about average hospital stay costs, click here. To read ACDIS’ sister publication, Revenue Cycle Advisor’s coverage of this story, click here.

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